Weekend Economist: QE3's final heading

The Federal Reserve still doesn't have the conditions it needs to plot a firmer path towards hiking interest rates.

Leading into the June Federal Open Market Committee meeting, we noted that changes to the inflation and unemployment view would be minimal and that the growth outlook would be the focus. We suspected that the 2014 growth forecast would likely be revised down to as low as 2.4 per cent, with the 2015 and 2016 forecasts unchanged. That lower-bound for growth was predicated on the new forecast needing to emphasise that the FOMC remained optimistic on the outlook – necessary to justify a continued reduction in marginal liquidity in the economy post the 1.0 per cent annualised first quarter gross domestic product outcome.



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